Property exemption fraud solution is making fraud detection an automated affair for Miami-Dade County, Fla.

Called Government Revenue Management (GRM) Insight, the program is helping investigators in Miami-Dade County to mine and analyze national databases to find individuals who may be improperly claiming tax exemptions. Initial efforts have been fruitful, unearthing approximately $5 million in back taxes owed by county residents.

The violations primarily deal with fraudulent claiming of homestead exemptions, which allow a tax break for individuals who own multiple homes. In Florida, the exemption caps the increase of a property’s assessed value by 3 percent year to year and allows a homeowner to deduct $50,000 from the assessed value of the home for county tax purposes.

Under Florida law, a person is allowed to claim only one homestead exemption on his or her property taxes. But determining eligibility was difficult. Lazaro Solis, deputy property appraiser for Miami-Dade County, said investigators had limited ability to track property ownership outside of Florida. This blind spot led to a number of illegal homestead claims.

With 67 counties in Florida, Solis said it was virtually impossible for his team to accumulate and analyze all the needed information. “We would need an army of investigators to go nationwide and pull all the information,” Solis said. “It’d be like a needle in a haystack.”

The new software is giving investigators a wealth of cross-referenced nationwide data at their fingertips. The simply enter a person’s name and Social Security number. Designed by Manatron Inc., the technology also prioritizes cases by weighting the evidence. The software attempts to weed out false positives that otherwise would be flagged for investigation.

The software also contains a case management function that essentially handles all the paperwork associated with placing a lien on a homeowner’s property when an illegal exemption is confirmed. Almost every clerical function is performed, except for providing the official signatures required for the documentation.

While the research and clerical efficiencies gained are nice, providing accurate leads that identify fraudsters is the program’s measure of success, and Solis felt that the software is doing its job. The county’s team of investigators typically work on 1,000 to 2,000 leads at any given time. This includes citizen tips and anonymous reports. But on average, only 25 to 30 percent of those leads resulted in finding a property tax exemption violation.

That percentage has tripled since the program was installed.

“With this new software … we’re seeing results in the neighborhood of 80 to 90 percent,” Solis said. “Although the final determination [of fraud] is made by a human being … their time is much more productive because the leads from the system are of higher quality and have better results. And the data is pre-digested for them, so they don’t have to go through public records to find one bit of information.”

Yielding Returns

Solis said the county’s Property Appraiser’s Office is in the process of adding some enhancements and functionality upgrades to the GRM Insight system. But investigators have been using live data from the program to find fraud.

The county’s initial look at the data from the program presented investigators with 289 leads, resulting in a success rate of 80 percent and the issuing of $5 million in liens that were processed at the end of June. A second batch of data provided 160 leads to investigators that so far has a 90 percent success rate.

Actual recovery of the money varies, however. Solis explained that in Florida, there is very little enforcement in collecting on the lien. While the lien sits on the property, making the property unable to be sold, the success rate for collection is about 50 percent. He added, however, that older liens — those from three years or further back — typically result in an 80 to 90 percent payment rate. That could be due to homeowners trying to clear the property’s title to sell their home.

Even though recouping fraudulent tax breaks from property homeowners isn’t a sure thing, the technology didn’t break the bank either. Solis said Miami-Dade County’s investment in GRM Insight was nominal, as the cost for using the technology is dependent on the county successfully recapturing money that the software identifies.

The basic agreement is that Manatron receives 10 percent of the penalties and interest assessed to the back taxes owed by a property owner, but only after the funds are recovered. The only caveat is if the property owner doesn’t pay within 30 months the county is still on the hook for the percentage owed to Manatron.

For example, if a property owner has back taxes of $10,000 due to an improper exemption claim, Florida law requires the county to impose a flat 50 percent penalty — bringing the total to $15,000 — plus an accrual of 15 percent interest for each year in question.

“In terms of cost to the county, there really is none because the taxes are going 100 percent back to each taxing authority,” Solis said. “So [the money goes] not just to the county, but the school board and cities as well. What the vendor recovers is 10 percent of the penalties and interest only.”